Non Profit Financial Literacy€¦ · • Debi@DebiPeverill.ca • (902) 468-1414 • 206-15...

www.BasicBoardGovernance.ca

Non Profit Financial Literacy

Debi J. Peverill

Workshop 2

www.BasicBoardGovernance.ca

Agenda

• Financial literacy for non profits:

Financial statements

Budgeting

Corporate income tax

Harmonized sales tax

FINANCIAL STATEMENTS

• Balance Sheet

• Income statement

Purpose of Financial

Statements• To report to stakeholders the actual

historical results of an organization

• Stakeholders include:∙ Shareholders

∙ Creditors

∙ Employees

∙ Regulatory authorities

∙ General public

Balance Sheet

The balance

sheet is a

snapshot of your

organization it

compares your

assets with your

liabilities and tells

you what the

equity is of the

organization .

•www.BasicBoardGovernance.ca

www.BasicBoardGovernance.ca

SAMPLE STATEMENT OF NET ASSETS

December 31,2015

ASSETS

2015 2014

Cash $2,000 $2,000

Grants receivable $2,363 $2,772

$4,363 $4,772

LIABILITIES

Accounts payable $1,500 $2,000

NET ASSETS

Net assets $2,863 $2,772

$4,363 $4,772

Asset

• Valuable resources owned by the corporation

• An asset can be monetary or capital

• Monetary assets such as:

• Money in the bank

• Accounts receivable

• Inventory

www.sbrcommunications.com

Money in the Bank - Cash

• The best type of asset

to have

• Very liquid

• Easy to write cheques

when you have cash

Accounts Receivable

• Amounts your

customers or funders

owe to you for your

product or your

service

• Only have accounts

receivable if you offer

credit

•www.BasicBoardGovernance.ca

Inventory

• Product which you

have for sale

• Can be sold within a

year

• Not obsolete

• Not over stocked

•www.BasicBoardGovernance.ca

Fixed Assets

• Tangible fixed assets

• Asset is subject to

amortization

• Lasts for longer than

a year and costs

more than $500

•www.BasicBoardGovernance.ca

Notes To The Financial Statements

Table 7.3

Notes To The Financial Statements

Fixed Assets:

2015 2015 2015 2014

Cost Accumulated Net Book Net Book

Depreciation Value Value

Tools $10,000 $9,000 $1,000 $1,200

Vehicle $25,000 $20,000 $5,000 $5,800

$35,000 $29,000 $6,000 $7,000

•www.BasicBoardGovernance.ca

Liabilities

• Obligations to transfer assets or provide

services to outside parties arising from

events that have already happened

• Classified as current and long term

www.BasicBoardGovernance.ca

INCOME STATEMENT

• This statement shows the revenues and

expenses of the organization and an

amount of profit or loss which has been

earned in the period being reported on

www.BasicBoardGovernance.ca

SAMPLE STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31

2015 2014

Receipts

Grants $59,000 $57,000

Donations $5,078 $2,097

Fees $2,000 $1,458

$66,078 $60,555

Expenditures

Wages $24,300 $20,000

Rent $8,100 $8,000

Program expenses $31,987 $29,874

Office $800 $1,200

Advertising $800 $709

$65,987 $59,783

Excess of receipts over expenditures $91 $772

Net assets at beginning of year $2,772 $2,000

Net assets at end of year $2,863 $2,772

•www.BasicBoardGovernance.ca

Revenue

• This is another word

for sales or fees

• Revenue = amount

you charge to other

people for your

product or service

• Grants = funds

received for a specific

purpose

Expenses

• Expenses are things

that you have to pay

for that are not assets

examples:

• Salaries

• Rent

• Travel

• Advertising

Budgeting

www.sbrcommunications.com

Purpose of Budgets

• To motivate employees to perform

• To evaluate employees performance

against the budgets goals

• An aid in making and coordinating short

range plans

• A device for communicating plans to the

employees

Operational Budgeting

• Annual budget – monthly follow up

• Budget follows the accounting system

• Spending control

• How do you review?

www.sbrcommunications.com

Reviewing An Operating Budget

• Compare to previous actual results

• Obtain explanations for any differences

from the previous actual results

• Do the assumptions being made appear to

be reasonable?

• Who is responsible?

www.BasicBoardGovernance.ca

ACCOUNTANTS

COMMUNICATIONS

• Notice to Reader

• Review engagement

• Audit

Tax Returns

www.sbrcommunications.com

What Do You File?

• T2 – all corporations

• Charity returns

• T4 – if employees

• T1044 – Non Profit return

www.sbrcommunications.com

www.DebiPeverill.ca

Corporate Income Tax Return

• Must pay tax three months after year end

• Return must be filed six months after year

end

• Penalty for late filing is 6% of unpaid tax

for first month increases by 1% per month

www.DebiPeverill.ca

Harmonized Sales Tax

• Tax is levied on

purchase

• Vendor collects and

remits the tax

• Rate is 15% in Nova

Scotia

www.PainlessFinancialLearning.ca

Do You Have To Register

• The requirement is that

everyone who has more

than $30,000 in taxable

sales in a year must

register

• You are allowed to

register if you sell less

• If you register, you must

charge the tax

www.DebiPeverill.ca

Three Types Of Sales

• Taxable sales, tax is charged and input tax

credits are allowed

• Exempt sales, tax is not charged but

therefore no input tax credits are allowed

• Zero rated sales, no tax is charged but

input tax credits are allowed

9 Steps to Reviewing Financial

Statements

• Does the balance sheet

balance?

• Is retained earnings

consistent?

• Does the entity have any

cash?

• Does the entity have any

equity?

• More current assets than

current liabilities?

• How is the entity

financed?

• Have they made any

money?

• Do any of the expenses

appear unusually large or

small?

• Are there any expenses

you expect to see and

you don’t?

www.BasicBoardGovernance.ca

www.BasicBoardGovernance.ca

Agenda

• Financial literacy for board members:

Financial statements

Budgeting

Generally accepted accounting principles

Corporate income tax

Harmonized sales tax

Internal controls

www. DebiPeverill.ca

Debi J. Peverill CA

• Debi@DebiPeverill.ca

• (902) 468-1414

• 206-15 Dartmouth Road

• Bedford, NS, B4A 3X6